Someone is ringing a tiny silver bell. It’s tea time for the employees of Tuft & Needle.
Two dozen young, carefully groomed men and women wander over to a table heaped with finger sandwiches and flaky croissants. Dressed in shorts and jersey skirts and polo blouses, they look less like a gathering of businesspeople than the residents of an especially glamorous youth hostel. Pretty much no one is wearing a shirt with a cuff or a button. It’s apparently sandal season.
As these handsome youth help themselves to beignets and clotted cream, I eavesdrop on conversations punctuated with phrases like “Seriously, dude” and “I’m all” and “I know, right?” No one mentions selling mattresses, the raison d’être of the local, high-profile start-up they all work for.
“We do this every Monday,” Daehee Park tells me, dropping into an overstuffed chair on my left. Park is the 27-year-old co-owner of Tuft & Needle. He’s wearing a white, V-neck undershirt, flip-flops, and a baseball cap. “Once our Grand Avenue offices are completed, we’ll have weekly tea over there.”
Oh, I think to myself. This is their version of the ping-pong table in the break room. Casual Friday, every day. That 21st-century business model that gets more out of workers by blurring the line between work and fun.
Park looks concerned. “You’re not drinking tea.”
“Oh, yeah, I’m okay,” I assure him.
“You have to try the mazagran,” he says, excusing himself to get me a glass of coffee with lemonade. The impressively bearded fellow I’ve seen moving from group to group, chatting amiably, slips into Park’s seat. This is JT Marino, Park’s 30-year-old business partner. He wonders if I have everything I need. Have I tasted the melon salad?
“I’m good,” I say. “But I’m not hearing much talk about mattresses.”
“That’s because the mattress is our widget,” he explains. “These people want to be involved with something that matters, and they want to be around other smart people. They want to master something. It’s not the mattress that’s drawing them to us, it’s solving the problem of the major unfairness in the mattress industry. It’s working for a really great company in a really great city.”
“Our product is really good, too,” says Park, who’s just returned with an icy glass for me. “We spent a lot of time creating a solid, really affordable mattress. We really believe in it. But we’re looking at the bigger picture, too.”
That bigger picture is hard to miss, just lately. Tuft & Needle’s in-your-face ad campaigns are pretty much everywhere, alternately shaking a finger at the mattress industry and trumpeting Phoenix as the best place anyone could ever hope to live or work in. Their startling and very public love letter to the city has appeared at CityScape, at Phoenix Public Market, and across from Chase Field, on billboards proclaiming “We Believe in PHX.” The ads tag a new website, phxbuilt.com, where startups can documents the joys of settling down in Phoenix.
Any yokel can appreciate an ad dissing the competition, but anyone who’s lived in the Valley of the Sun for more than a month is going to be suspicious of a couple of transplants from Silicon Valley who appear to dig Phoenix more than their own northeastern Pennsylvania hometowns. They’re proving their love by buying and restoring a block of historic buildings in the warehouse district; with a website that ballyhoos Phoenix as the next startup capital; and with those “We Believe in PHX” billboards.
Either Park and Marino are as into our city as they are selling a better queen size, or they’re savvy out-of-towners using our civic pride to launch their money-making take on the Posturpedic.
Either way, Phoenix wins.
About halfway through high tea, Park and Marino amble into one of the conference rooms at Mod PHX. This co-working space at Central Avenue and Thomas Road is the company’s home away from home during renovation of the former Grand Avenue hardware store they’ve purchased. Tuft & Needle will be headquartered there this fall; in the meantime, they’re renting a warehouse on Grant Street and taking meetings, like this new-hire orientation, at Mod.
Marino walks around a long conference table, shaking hands with a half-dozen new employees, asking each about their last job. This one was a social worker; that one taught special ed. No one mentions mattresses or having worked in sales.
“None of our people come to us from the mattress industry,” Park had told me earlier in the day. “Those guys don’t want to work for us, and we don’t really want them here, either.”
“I usually wing these meetings,” Marino admits to the crowd. “So, what do you guys want to know about this company?”
After a brief pause, a young woman gasps: “I mean, like, everything!”
Everyone laughs. Park settles into a chair while Marino launches into the Tuft & Needle story — about how he and Park cofounded the mattress-making company in 2012 with just $6,000 and a desire to leave their less-inspired careers in software engineering. And how they turned down offers from venture capitalists interested in Tuft & Needle’s early success, opting instead to borrow a half million dollars from Bond Street, one of a new breed of alternative lenders that promotes new business models.
“We knew having investors meant giving up control of how the company is run,” Marino tells his hopeful staffers. That company was inspired by the nasty experience of buying what he calls “my first adult mattress,” and the discovery that this mattress, made up of what he estimates to be about $300 worth of foam and springs, had cost 10 times as much. It was, Marino says, “that jaw-dropping moment for Daehee and me.”
He’s only getting warmed up. “I’d just gotten married. Three thousand dollars was the most I’d ever spent on anything other than my computer. It was really hard to research mattresses online, and really confusing when my wife and I went to a mattress store, because the guy was just trying to sell us something expensive.”
Marino’s mattress arrived a month later, on a filthy truck. The deliverymen dragged his $3,000 investment through his apartment, leaving a muddy trail behind. “We slept on it for a couple weeks,” he tells his staff. “And we hated it.”
A bitch session with Park, Marino’s best friend from Penn State, led to a larger discussion about taking on the $15 billion mattress industry, which for decades had been dominated by household names like Sealy, Serta, and Simmons. These companies, Park says, were selling the same mattresses at four different price points, mattresses that he says are made of the same old stuff and marked way up past their value.
After much complicated mattress re-engineering, the pair came up with a straightforward sales approach: Tuft & Needle would offer a single, high-quality foam mattress in a few different sizes, assembled in California and sold directly to customers via online sites. There would be no confusing in-store comparisons overseen by commission-driven snakes, although buyers would have the option of visiting a showroom to test-drive a T&N model. Mattresses would arrive in the mail and have a hassle-free return policy. Prices would range from $350 to $750, depending on mattress size.
The partners knew that launching in Silicon Valley, where both were living and working — mostly working, and way too much, they now admit — would be expensive and require exhausting amounts of their personal time. But setting up in a more economically friendly city would give them a leg up. “There wasn’t one silver-bullet reason, but rather a constellation of them, a whole series of practical, cultural, and philosophical things,” the partners write in an essay posted on their company website about why Phoenix beckoned.
They set up shop in Arizona in 2012, first in a tiny Tempe space, and later in one of developer Michael Levine’s warehouses on Grant Street. When they outgrew that, the duo bought the 100-year-old, 36,000-square-foot O.S. Stapley building on Grand Avenue, which they’re renovating into a showroom, storefront, and offices that will include a public café and an inside basketball court.
Marino wraps up his history lesson with the startup’s financial victories: Year One scored Tuft & Needle its first million; by 2014, its revenue was nearly 10 times that. Last year, the company piled in $42 million; this year’s coffers are expected to contain somewhere between $125 million and $225 million. The company has grown from four employees to 110, most of them here in Phoenix.
As the trainees file out, clutching brand new MacBook Air tablets, I ask Park how the mattress industry has responded to T&N’s out-of-the-box boffo sales.
“At first, they didn’t take us seriously,” he admits. “Two years ago, we spoke at this national mattress convention, and after we finished talking about how we’re going to do things, there was silence. This year we went back, and every one of the major brands was there with a new ad campaign that looked a lot like ours.”
Long-established sleep companies are ripping off more than T&N’s advertising designs. Sealy claims its Cocoon mattress was years in the making and unlike any other, although its design and marketing appear to borrow wholesale from the T&N model. Venture-funded Casper launched in 2014 with a nervy slogan (“Changing the way people shop for mattresses!”) and a lot of crowing about how — huzzah! — they only sell one mattress. The new Dream Bed line from Mattress Firm trumpets two-day mail delivery and a six-month return policy — both concepts that Park and Marino offered a couple years before. (When I ask, in an online chat with a Mattress Firm agent named Nicholas, if the Dream Bed is a Tuft & Needle mattress, he replies, “They are not the same mattress, however they do seem to have similar features!”) Each of these companies is offering product that’s at least twice as expensive as Tuft & Needle’s.
Park isn’t worried. The big guys, he says, will always be a year behind his company. “Their attitude is, if two young kids can do it, why can’t we? We think they can’t because of that attitude. Rather than trying to learn from what we’re doing, they’re just stealing our ideas. By the time they roll them out, we’ve already moved on to the next idea.”
More telling than all this alleged industry thievery is the number of acquisition offers T&N has received. “We want to be respectful,” Marino says of the mega-companies that come sniffing around. “So we tell them we don’t want to sell, we don’t want to share our secrets. We don’t tell them we want to stay around to fix the mattress industry, to heal it.”
They also want, Mark Kinsley says, to disrupt it. “They’re succeeding because the system for buying mattresses is broken,” according to Kinsley, vice president of marketing for the bedding group Leggett & Platt and an executive editor of Sleep-Geek.com, an industry website.
“For the longest time, the only way to buy a mattress was to go to a bedding store with a station wagon. There wasn’t much attention to customer service, and there was a lot of deliberately confusing sales techniques being used. These guys came along and said, ‘We’re going to sell a single product, and we’re going to make sure our customers fall in love with the experience of buying it.’ It’s working.”
Park says the mattress industry is bizarre and riddled with laziness. “It’s a lot of older white guys, with almost no women or racial diversity. The principals aren’t creative, they’re people who want to be in meetings all day, hiring and firing. They don’t want to be creative. The product is stale and made from the same materials they’ve used forever. We’re doing something different, and we want them to do the same. I don’t know if we’ll become the number-one company or not, and I don’t care. What we want is for the industry to change. People shouldn’t have to hate buying a new mattress.”